Good point on the winner takes all. At the same time many parlimentary systems are effectively a two party system since a coalition needs to form to create a majority goverment. In this case the parties are more fluid in compostion but for the length of an election cycle, they decide, (by game theory), to form a party. If a party is unquestionabily a majorty then no coalition is formed. Game theory at its best. Same in US, but you are right in that the winner takes all rules reshape the equilibruim points so that two permanent parties emerge.

Re VHS/Beta, the biggest cause of Beta's demise was that Sony's licensing agreement was so onerous that there were only 3 major manufacturers making Beta yet about 10 making VHS which made them much more available, and this also meant that video hire store demand was higher for VHS tapes. This meant in turn more hire movies were available for VHS which spiralled purchases of VHS machines still more. Technically Beta machines were superior giving an extra 20 lines of resolution and the transport mechanism was highly valued because you could instantly switch from play to fast forward or reverse and easily fast forward play making editing much easier. High end video recorders used the the Sony U-loading system for many years after Beta's demise for this reason. It was also kinder on tape.

In Oz it was a little different, We had 3hrs15min on Beta and only 3 hours on VHS. Sanyo imported too many Betamax VCR's early in the day and had to literally dump them on the market where they were available at nearly half the price of VHS recorders. This meant that for a few years Beta was about 3:1 in front. Then Sanyo who made both Betamax and VHS phased out Beta because it was only a small portion of their global sales leaving only Sony & Toshiba. This combined with the usual salesmen pushing what they could get the easiest caused a rapid turnaround.

Good question! Let me take a stab at answering it. Let me re-ask it for the readers: "so USA has 2 party system...but other coutries do not...how do you explain that using Nash concept?"

Buchanan showed that Nash equilibriums exist in political systems. If you recall, there may be 1, many, or no equilibriums in any given game. I suspect that there may be many in a democracy, so a 2-party system is not the only equilibrium. I've lived in France and Switzerland, all with multiple viable parties. I don't know enough to judge if these were in equilibrium state or not (more or less parties becoming viable with time). What signifies an equilibrium is that it is so hard to disrupt. Indeed, the US, once it had evolved to its particular 2-party system, though it had many parties earlier, has pretty much "snapped to grid", even when major third party candidates have had good publiciity. We always go back to two.

I think the particular US rules are one reason why we are in 2-party equilibrium. There are significant hurdles for a third party, and the nature of the voting is "winner-take-all" in geographical districts. This is different from many European parliment systems where there is a proportional element nation-wide, albeit with a hurdle. I think this explains some of why the US 2-party system is so entrenched relatively to many European nations: if your party in the US will only get 15% of the vote, though it is your favorite over the other two, you still lose. So, to get someone in office, you have to vote for one of the two major parties. This hurdle stops a third party from emerging. However, if a given party in Europe gets 15% of the vote, it is likley to get representatation in parliment, and has the option of joining other parties in a coalition. This gives a different incentive to the voters to vote for their preferred party even if it isn't one of the two largest.

Bottom line: the rules of the game influence the types of equilibriums that exist.

From what I remember from the university physics - mass is similar to inductance, and mechanical spring (stiffness) - to capacitance. Two springs with equal stiffness, connected in series, will have twice lower stifness, like capacitors connected in series...

David and Caleb, "it's elementary." VHS won because in the very first offerings, it gave us 2 hours of recording time vs 1 hour for Beta. Since these VCRs were used for time shift recording, the decision was a no-brainer. (Plus VHS had several other advantages that people continue to forget, such as heads moving away from tape during rewind, and stereo audio capability from day 1. Both of which Beta eventually caught up with, years later.)

Good article. Indeed, game theory, when it's representated in math equations, looks very much like any other optimization technique. Whether the field is operations research or economics, it's kind of cool to see how all of this is the same. I had the same experience in a course called "systems analysis," offered by the EE department, in which mechanical systems were defined exactly the same way as electronic circuits. For passive components, dashpot = resistor, spring = inductor, mass = capacitor. So for example, resonance and oscillation are fundamentally the same, whether you're talking circuits or suspension systems. Very cool stuff.

@Caleb - don't be confused. In the mind of Joe Average, convenience and features (and, to some extent, bling) win against technical excellence every time. Hence VHS instead of Beta, Windows instead of Linux, etc.......